> When they only have to make a small payment, they effectively already have another payday loan equivalent. Before, they had to scrounge up $230 to pay off the loan, and they could get another $200 loan back out immediately. Now, they can take $230 from their paycheck, move $200 from one pocket to another, pay off $20, and have a bonus $10.
> In other words, any money they would have gotten from 'another loan' is an illusion, because that loan was sourced directly from their own wallet, with someone else taking a cut. They don't need 'another loan'.
Well, obviously exactly the same argument applies to the first loan -- it's sourced directly from their own wallet, with someone else taking a cut. But you don't see a lot of people arguing that therefore there was never a need for any lending in the first place (actually, you do; old religions have quite a bit to say about this. You don't see a lot of people making the argument today).
> I do occasional work for my hospital’s Addiction Medicine service, and a lot of our conversations go the same way.
> My attending tells a patient trying to quit that she must take a certain pill that will decrease her drug cravings. He says it is mostly covered by insurance, but that there will be a copay of about one hundred dollars a week.
> The patient freaks out. “A hundred dollars a week? There’s no way I can get that much money!”
> My attending asks the patient how much she spends on heroin.
> The patient gives a number like thirty or forty dollars a day, every day.
> My attending notes that this comes out to $210 to $280 dollars a week, and suggests that she quit heroin, take the anti-addiction pill, and make a “profit” of $110.
> At this point the patient always shoots my attending an incredibly dirty look. Like he’s cheating somehow. Just because she has $210 a week to spend on heroin doesn’t mean that after getting rid of that she’d have $210 to spend on medication. Sure, these fancy doctors think they’re so smart, what with their "mathematics" and their "subtracting numbers from other numbers", but they’re not going to fool her.
If we divide payday lendees into two classes, the ones who get stuck in a cycle of rolling over their loans are behaving like the heroin users. They won't be helped by the higher-cost lower-APR loan because they will not "take $230 from their paycheck, move $200 from one pocket to another, pay off $20, and have a bonus $10", and don't understand that process. They will take $20 from their paycheck, pay off $20, spend the rest of their paycheck on analogical heroin, and wind up with $0, which is less than $10.
The ones who don't get stuck in a cycle of rolling over their loans won't do that, but they weren't doing it anyway. You haven't benefited them; you've made their operating costs significantly higher. No one benefited from your change to the system.
> But you don't see a lot of people arguing that therefore there was never a need for any lending in the first place
Because loans give you money now to repay later. It's not loans that are unnecessary, it's rolling over loans that is bad when you could have gotten a longer loan at the start.
> You haven't benefited them; you've made their operating costs significantly higher. No one benefited from your change to the system.
You're forgetting your own words. Getting extra loans when they already have loans becomes harder. They won't be able to get so many loans that the cost is higher overall. They will be stuck with 'merely' 2-3 times as much loan money, for example. It will be impossible for them to have higher costs.
> They won't be helped by the higher-cost lower-APR loan because they will not "take $230 from their paycheck, move $200 from one pocket to another, pay off $20, and have a bonus $10", and don't understand that process. They will take $20 from their paycheck, pay off $20, spend the rest of their paycheck on analogical heroin, and wind up with $0, which is less than $10.
You're not arguing against what I said, you're just saying that the $10 they didn't spend on fees gets spent on something else. Well that's the goal, isn't it?
They always get their paycheck. They don't have to understand loaning for that to happen. At the end of they day they have $210 in their pocket when they used to have $200. They might spend it all on heroin, but they will have $10 more of it.
"I think that they would be literally unable to summon the motivation necessary to get that kind of cash if it were for anything less desperate than feeding an addiction."
That's an extremely valid argument for that particular situation, but it does not apply to paycheck money. You already put in the effort, and earned it. You're just making a slightly different transaction on the way home.
>> I think that they would be literally unable to summon the motivation necessary to get that kind of cash if it were for anything less desperate than feeding an addiction.
> That's an extremely valid argument for that particular situation, but it does not apply to paycheck money. You already put in the effort, and earned it. You're just making a slightly different transaction on the way home.
If you read even farther than that, you'll see the author apply the same argument to his own time, which everyone earns equally. The easiest and most common way to find the money for something is to take that money away from less-important uses, not to earn extra money.
There is either equivalent effort or less effort when the loan is long-term instead of constantly making new loans. Less paperwork, possibly fewer trips to the place you got the loan. And it's not just the amount, the actions you go through are nearly identical in either case. There is no motivational or time or money benefit to the payday loan scenario.
> In other words, any money they would have gotten from 'another loan' is an illusion, because that loan was sourced directly from their own wallet, with someone else taking a cut. They don't need 'another loan'.
Well, obviously exactly the same argument applies to the first loan -- it's sourced directly from their own wallet, with someone else taking a cut. But you don't see a lot of people arguing that therefore there was never a need for any lending in the first place (actually, you do; old religions have quite a bit to say about this. You don't see a lot of people making the argument today).
You're ignoring the point I was making, though. Compare: http://slatestarcodex.com/2014/05/25/apologia-pro-vita-sua/
> I do occasional work for my hospital’s Addiction Medicine service, and a lot of our conversations go the same way.
> My attending tells a patient trying to quit that she must take a certain pill that will decrease her drug cravings. He says it is mostly covered by insurance, but that there will be a copay of about one hundred dollars a week.
> The patient freaks out. “A hundred dollars a week? There’s no way I can get that much money!”
> My attending asks the patient how much she spends on heroin.
> The patient gives a number like thirty or forty dollars a day, every day.
> My attending notes that this comes out to $210 to $280 dollars a week, and suggests that she quit heroin, take the anti-addiction pill, and make a “profit” of $110.
> At this point the patient always shoots my attending an incredibly dirty look. Like he’s cheating somehow. Just because she has $210 a week to spend on heroin doesn’t mean that after getting rid of that she’d have $210 to spend on medication. Sure, these fancy doctors think they’re so smart, what with their "mathematics" and their "subtracting numbers from other numbers", but they’re not going to fool her.
If we divide payday lendees into two classes, the ones who get stuck in a cycle of rolling over their loans are behaving like the heroin users. They won't be helped by the higher-cost lower-APR loan because they will not "take $230 from their paycheck, move $200 from one pocket to another, pay off $20, and have a bonus $10", and don't understand that process. They will take $20 from their paycheck, pay off $20, spend the rest of their paycheck on analogical heroin, and wind up with $0, which is less than $10.
The ones who don't get stuck in a cycle of rolling over their loans won't do that, but they weren't doing it anyway. You haven't benefited them; you've made their operating costs significantly higher. No one benefited from your change to the system.